Bing/Yahoo and Windows Mobile 6.5, though, are suffering in terms of market share. Both share a common problem -- Google. (Source: MobileTech World)

Windows 7 is the best-selling OS in history, so why aren't investors taking note? Look to the mobile and search businesses...

Following
its perennial rival Apple's announcement of a terrific
quarter, Microsoft had some good news of its own. At 5:30
p.m. E.D.T. Thursday evening, Frank Brod, Microsoft's chief
accounting officer, and Bill Koefoed, general manager of Investor
Relations at Microsoft, announced earning
information for Microsoft's quarter ending March 31.

The news
was impressive. Microsoft's fiscal third-quarter revenue
totaled $14.50B USD, up 6 percent from the same quarter a year ago.
Factoring in the deferral of $305 million of revenue relating to
the Microsoft Office 2010 Technology Guarantee program, the revenue
totaled $14.81B USD, a rise of 8 percent.

Operating income,
net income and diluted earnings per share were $5.17 billion,
$4.01 billion and $0.45 per share, increasing 17 percent, 35 percent,
and 36 percent, respectively, from a year ago.

Those gains
came largely on the back of Windows 7, the fastest
selling operating system in history. Peter Klein,
chief financial officer at Microsoft, comments, "Windows 7
continues to be a growth engine, but we also saw strong growth in
other areas like Bing search, Xbox LIVE and our emerging cloud
services. Our record third-quarter revenue along with continued
rigor on cost management resulted in exceptional EPS
growth."

Kevin
Turner, chief operating officer comments, "Business customers
are beginning to refresh their desktops and the momentum of Windows 7
continues to be strong. We are also seeing tremendous
interest in our market-leading cloud services for business."

Despite
the terrific success, investors aren't showing Microsoft as much love
as one might expect. Microsoft stock actually dropped a bit
over 1 percent in after hours trading. Granted, it rose in the
last couple weeks, but overall it's up just over 25.8 percent since
early October 2009. Apple's stock, by contrast, is up 47.8
percent.

One possible reason for investor's unusual lack of
bullishness is weaknesses in the non-Windows part of Microsoft's
platform. Xbox and Zune business units are performing decently,
but the critical Windows Mobile business has been losing
large chunks of market share.

Microsoft's
Windows Phone 7 OS can't come soon enough, but that product faces
skepticism from smartphone shoppers due to its lack of support
for multi-tasking
and copy-and-paste. Meanwhile, it is likely that
Microsoft's existing smartphone OS, Windows Mobile 6.5, will get
passed by Google's Android OS sometime this quarter. That's a
troublesome sign as more computing jumps to the mobile realm.

In
the internet search business Bing has failed to grow, as
well. According
to market research firm Net Applications, Bing has dropped
from a peak marketshare of 3.52 percent in August to 3.11 percent in
March. Partner Yahoo, whose search is now powered by Bing, has
suffered even more dropping from 7.28 to 5.38 percent over the same
time period. Meanwhile, between July and March, Google jumped
from 78.45 percent to 85.75 percent. Those numbers paint a
rather bleak picture for Microsoft's long-troubled search efforts,
which it has poured money into.

Ironically, both in the mobile
phone and the search markets, Microsoft has the same problem, and
that problem has a name -- Google.

So while the company has
plenty to celebrate, thanks to the storied Windows 7, there won't be
much fanfare in the earnings reports for the languishing smartphone
or search engine business units.